The hunt for a serial killer stalking the sleepy north Italian town of Merano ended in violence yesterday as the culprit claimed two more victims, holed up in a lonely farmhouse with two hostages, and then, after a dramatic gun battle with police, turned the murder weapon on himself.

The man responsible for shooting six people at close range over the past three weeks turned out to be a German-speaking neo-Nazi committed to reunifying the Alto Adige with Austria. All but one of the victims were Italian- speakers.

The alarm was raised in mid-morning when farmers in the hamlet of Rifiano, about six miles from the centre of town, heard gunshots coming from the house of a local bricklayer, Tullio Melchiori. The murderer, Ferdinand Gamper, had killed Melchiori, his landlord, and had forced his wife and daughter at gunpoint to follow him into a barn next door.

When police arrived, Gamper barely gave them time to discover the body before he opened fire, shooting a Carabinieri officer in the head. The officer was whisked to hospital but died three hours later.

Other police took cover in the surrounding woodland. Eventually they fired several volleys of tear gas into the barn, setting the building on fire. The shooting stopped and the police stormed in, to find the two hostages unharmed on the ground floor and the murderer dead with his weapon in his hand. A note in German read: "You got here too late." He had shot himself through the mouth.

With his hulking frame, blond hair and short beard, Ferdinand Gamper, 39, was a perfect fit for the Identikit picture of the murderer developed since the shooting of a factory worker in Merano's main square on Tuesday.

Next to his body was the blue rucksack that was spotted by several witnesses. The gun was a match for the .22 weapon used in the earlier killings.

Among the documents recovered by police were posters and stickers in German, advocating the Alto Adige's reabsorption into Austria. A long note left beside Melchiori's body included a "terrifying" paean to Nazism and an admission, which has yet to be verified, that Gamper murdered one or more children.

Merano had been living in fear since 8 February, when a senior Bundesbank official and his Italian fiancee were shot. At first investigators suspected a link with the banker's work or his estranged German wife. They now believe the two were "punished" for wanting to settle in Merano as an ethnically mixed couple. A shrine marking the site of their murder was smeared with human faeces a few days after their deaths.

The third murder, targeting a crippled local farmer, triggered the arrest of a young Italian-speaking plasterer, Luca Nobile, who was found near the scene with bloodstains on his clothing. He was released from custody last night.

The Alto Adige, or South Tyrol, was part of Austria-Hungary until the end of the First World War, when it was given to Italy. It was dogged by ethnic tension, owing to Mussolini's aggressive attempts to Italianise it; during the 1950s there were regular terrorist attacks.

In recent decades, the nationalist sentiments of the German-speakers and the strong neo-Fascist sympathies of many local Italians have been checked by the economic benefits brought by the Alto Adige's special status as an autonomous region. However, the two communities still have little contact, and in many bars, shops and hotels, members of one or other ethnic group are banned altogether.